Bitcoin Price Rally Falters following a 20% Plunge in a Single Day

Over the last few weeks, the price of bitcoin has been on the rise. There have been a few reasons for this, with the most prominent being massive speculation by investors. There were other formidable reasons including a rising demand for the cryptocurrency in China, as BTC would circumvent tough restrictions placed by the government on online activity. There is also the belief that bitcoin is a safe asset, somewhat like gold. When Greece defaulted on payments to creditors sometime last year, investors bought both gold and BTC seeing them as safe bets. When the Brexit happened, investors flocked to BTC fearing financial armageddon (really?). The cryptocurrency also rallied following the election of President Trump to the WhiteHouse. The recent rally saw the price shoot from sub $700 levels to over $1,100 in a matter of weeks.

What is Bitcoin?

Bitcoin is a global digital currency based on distributed computing instead of gold standards or central banks. Bitcoin has evolved from a term for the nerds and geeks of the world with over $2 Billion transactions daily and over 400,000 businesses accepting the currency. It is particularly revered for its Block Chain technology. For those who are less familiar with the ins and outs of the currency, blockchain is a “general log of transactions” on which “you can see all transactions that have ever taken place or ever will take place.”

Yesterday, the price of Bitcoin fell nearly 20% from $1,139 to just over $885. According to Bloomberg, the price drop slightly correlated with the rise in price of the Chinese Yuan. This inverse may explain the nexus of China being responsible for the rally in prices (I still think its a stretch). The last time bitcoin had such a rally was a few years back, this rally fuelled by public excitement and hysteria saw a bubble emerge, where BTC traded at $1,200 ranges. The hype then died down and the prices retreated.